Budget 2021: Cities need MGNREGA-style job scheme

As India braved the Covid-19 pandemic, the government announced an initial ₹20 lakh crore economic stimulus package under its ‘Atmanirbhar Bharat’ initiative in May 2020. The package included an additional allocation of ₹40,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to address the distress caused in rural areas by the huge reverse migration of migrant labourers to their homes. This took the overall allocation for the scheme to more than ₹1 lakh crore from the earlier ₹61,500 crore Budget.

An analysis of MGNREGA allocations over the past few years shows a steadily increasing trend with an average year-on-year growth of 13% between 2016-17 and 2019-20 and a steep rise of 43% in 2020-21.

The stringent lockdown in the first quarter of FY21 severely affected the lives of people due to the high rate of unemployment, reverse migration from cities to rural areas, widespread loss of jobs and livelihoods, closure of small businesses, and many other adverse factors. It is estimated that nearly 4 crore internal migrants moved back to their homes (mostly to villages) during this time. The government tried to support them by increasing food subsidy allocations under the National Food Security Act (NFSA) and the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which were largely delivered through the public distribution system. This helped to augment availability of food in rural areas.

The government’s increased fiscal allocation to the rural job guarantee programme helped substantially in providing livelihood-related support to a large number of people in FY21. MIS data indicates that the number of people who benefitted from MGNREGA increased from 7.89 crore in 2019-20 to 10.1 crore in 2020-21, which means 2.2 crore new individuals have been added in the current year till January 2021.

However, the additional demand for MGNREGA indicates that overall average days of employment provided per household came down to 44.55 in 2020-21 compared to 48.40 in 2019-20. As on January 13, 2021, total expenditure under this scheme was ₹85,183 crore (indicating fund utilisation of 91.79% with 306 crore person days of work). During the current financial year, this programme is expected to see utilisation of its entire revised budget, and person days of work may be at an all-time high of around 330 crore days.

Easing of the lockdown and the return of migrants to urban areas could reduce the pressure on this scheme in the next financial year, compared to the current year. Moreover, with the end of the harvest season in the next few months, we can expect an increasing number of migrant workers returning to work in urban areas, which are gradually limping back to normalcy. In view of this, a Budget of ₹1 lakh crore may not be necessary, but the allocation is expected to exceed the 2019-20 revised allocation amount.

MGNREGA is expected to play a pivotal role in 2021-22 in ensuring rural livelihoods. However, in addition to financial allocation, it is important to keep in mind three factors (i) identification of productive use of labour; (ii) tracking and maintenance of productive assets being generated; and (iii) prioritisation of beneficiaries to ensure that vulnerable segments are not overlooked.

One of the challenges faced by MGNREGA has been the delay in release of funds to beneficiaries. While this situation has improved over the years, what needs to be borne in mind is that timely wage payment to workers is of paramount importance for rural households during this current crisis. Finally, commissioning of regular social audits to ensure transparency and accountability, with large allocations being made to the scheme, and meaningful utilisation of funds are key in driving its overall success.

Economic activities may have resumed, but complete recovery has still not taken place till date. Migrant workers may return to urban areas but could face challenges in finding work, since several sectors are yet to recover or reach the level of recovery required to accommodate additional workers. According to the Centre for Monitoring Indian Economy (CMIE) around 19 million salaried formal economy jobs were lost after the lockdown. The huge impact of the pandemic on urban jobs and livelihood calls for an effective and innovative scheme or approach, in collaboration with digital platform-based organisations, to create new jobs and opportunities to provide livelihood options in urban areas. To meet this need, the government could perhaps consider an urban employment guarantee scheme (in line with MGNREGA) in the upcoming Union Budget.

Views are personal. The author is partner and leader, Social Sector, PwC India.